Silver Price Rallying into Resistance, Watching ST Channel for Guidance
- Silver working its way into resistance
- Watching for signs of rejection…
- …and a break of the rising channel
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The bounce in precious metals continues from oversold conditions, with silver now having taken back the last leg lower following the break of the March low. It was a vicious three week rout, a snapback was to be expected.
The first line of potential resistance we had penciled in was the broken January 2016 trend-line, which brought in no selling interest, and not all that surprising given how close it was to the recent low. This brings us to the point we’re at now, which is around the March low – it’s a good spot to watch for sellers to step in. Ideally, in the next day or so we see a turn lower from here for a possible re-entry into a short trade.
If there is no response around current levels, then we will need to turn our focus to the next line of resistance just above at the July trend-line. It’s a trend-line which is quickly losing its influence (hence dotted out on the chart), and if we don’t see silver have any reaction around this line we will likely remove it from the chart (the slope could very well be played out). The line which may draw some interest, though, is the January/March trend-line near the 17.10 mark. Should we see a really aggressive bounce the 200-day at 17.64 could come into play, but if silver is to make a run at the December low then it seems unlikely a rally will develop to that point.
So, we have inflection points to operate off of on the daily chart, but the current bounce is also playing out in the form of a well-defined rising channel; this can be used to help us better time any turn which may soon take shape. Whether it's used as a potential exit sign for longs or entry sign for shorts. A rejection at resistance and break of the bottom-side trend-line would be a solid sign of momentum turning back towards the broader trend lower.
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---Written by Paul Robinson, Market Analyst
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